Much has been written about the CPA; its effects on business and consumers alike. Reading the Act is a major undertaking as it covers some 480 pages. We made a point of studying the parts which affect the used vehicle industry. In this article I will explain in simple terms how the CPA will affect you in terms of buying and selling motor vehicles.
The media has made a meal of the Act in that in many ways they have misled the public into believing they can return a car to a dealer within 6 months of purchase under almost any circumstance. I receive approximately 30 calls for assistance in connection with CPA issues each week and I have been appalled at the levels of misperception. What the (the media) have singularly failed to do is explain under which circumstances this may happen and what the ramifications thereof are. I am going to list some of the more important facets of the Act:
The dealer must disclose any known faults in the vehicle to you and also list what he has done to the vehicle in terms of reconditioning. Note that these should be abvious faults. The dealer has to rely on his experience and mechanical knowledge to make a judgement call on a car's condition. It cannot reasonably be expected that the dealer must know absolutely everything about each car he deals with. In cases of arbitration the Ombudsman will most certainly always revert back to the issue of "reasonableness".
The dealer must also disclose the year of first registration as well as the code status of the car. i.e. New; Used; Imported; Stolen/Recovered; or Rebuilt. He has to allow you to inspect the vehicle and conduct a road test. The object of this clause is to ensure that the buyer is making an informed choice. The words “Voetstoots” and “As Is” are no longer permitted but of course, older, high mileage cars still need to get sold and these will now be sold as “scrap” but without a roadworthy certificate. If the seller has supplied a roadworthy certificate on such a car, it implies a six month warranty. Note that the intent of the word warranty within this context does not imply maintenance. It must match the criteria of "fit for the purpose for which it was purchased"
2. Wear and Tear:
The buyer will be required to sign that he accepts that he is buying a used vehicle and that it has a level of wear and tear and that it is not expected to perform like a new vehicle. i.e. The buyer will not be able to return the vehicle based on wear and tear complaints.
3. Right to return the vehicle:
The buyer may return the vehicle to the seller within a 6 month period under certain conditions. This is subject to Section 56 (2) of the Act. - Wear and tear is excluded. There has to be a proven defect in the car or the buyer must prove that the vehicle was sold to him which was not fit for the purpose for which he bought it. The onus will be on the buyer to provide evidence of such defect. The buyer has the option of requesting a repair, replacement or refund. The reasons for such an action have to be legitimate, reasonable and provable. A motor vehicle is a complex piece of machinery and will be treated differently to buying a fridge or a toaster, for example. It is very important to note that the National Credit Act has to fit into the CPA, so if the car you have bought is under a finance agreement, things will be a lot more complicated.
Since vehicles are goods which devalue with use, the purchaser will be liable for the usage of the vehicle,plus any damages he has inflicted on it, plus the costs of re-roadworthying the vehicle and getting it back into the dealer’s stock. For those naive buyers who thought they could buy a car from a dealer and hand it back after 6 months and keep going like that forever having a free car, well, sorry, but that is simply not a reality. There is also a certain time frame and a process for dispute resolution which has to be taken into consideration. The Motor Industry has its own Ombudsman to whom all unresolved disputes will end up with. It is expected that the time frame for resolution will be about 3 months.
In cases where refunds are given on vehicles, the buyer will be responsible for the difference in price attained when the vehicle is resold to a new buyer. These are all items the media have failed to inform the public of. My concern is that this will lead to unrealistic consumer expectations.
4. Cooling off period:
This is only applicable if the Offer to Purchase and/or Instalent Sale Agreement was signed at a place other than the seller’s premises or the finance company’s premises. It is also applicable if the vehicle was sold to the client by direct marketing. i.e. If the salesperson called you as a “cold call”.
The price of the vehicle must be fair, reasonable and just. The basic intention of the Act was to protect the poor and the uneducated segment of the population. This would be a very difficult law to apply in practice as in the case of vehicles they are all bought and sold very close to the book values, give or take a percentage for low or high mileage and/or condition. By definition the correct market value of a product is what one can get for it on a given day. Some cars command values far in excess of the book value and the public are willing to pay those prices if the product is in short supply. Conversely other products are not worth anywhere near the book value, but every car has a given price at which it will eventually sell. Thus it would be almost impossible to apply this part of the CPA to the sale of used cars, except in a very obvious circumstance.
6. Safe use of the product:
The client will now be required to sign a declaration whereby he accepts responsibility that a motor vehicle is a dangerous item and he will not be allowed to claim against the seller if he injures himself in using the vehicle after signing such a declaration.
7. The right to Documentation:
Buyers will be entitled to receive copies of all relevant documents relating to the purchase of the vehicle. He will be required to sign receipt of all those documents.
8. Implied 6 month warranty.
(Note how frequently the word "reasonable" is used in the Act. It is important to understand that the Act was written with the intention of it being applied within reason to all parties)
The CPA requires the seller to stand good for the reasonable durability of the vehicle for a period of 6 months. This is an implied warranty on defects. It is important to understand the difference between wear and tear and defects. Tyres, exhausts, brakes, clutch, etc, would be wear and tear, whereas a gear suddenly jumping out would be a defect. There is no mention of a mileage limitation. However, again, there are several clauses preventing abuse of this protection. It excludes wear and tear and normal maintenance; as well as misuse or negligence. It also specifies the word “defects”. This implies that the fault should have been (wittingly/or unwittingly) present in the vehicle at the time of delivery.
The buyer will need to provide proof to the dealer/finance house/Ombudsman of such defect. This is going to be costly and time consuming. The main beneficiaries will no doubt be the legal profession. Many dealers will not sell a car to you, without you purchasing one of the extended warranty products available on the market. It is also important to note that the Act does not require a seller of second hand/used goods to supply those goods with a written warranty.
Fortunately most dealers do provide a written warranty. In such a case, the warranty might be less than the 6 month stipulated period, or equal to it or even longer than 6 months. The vast majority of dealers will strongly encourage customers to purchase an extended after market warranty. By doing so, it would not in any way, reduce your rights as a consumer.
That covers the basics in terms of buying used vehicles. The wise buyer will carefully study the Act before embarking on a claim as it could end up costing him money to return the goods. Used vehicles are different to a new toaster bought at a supermarket. It is far more complex and hence the reason that the motor industry has been given its own Ombudsman. After all the dust has settled, I believe those dealers with a solid reputation will carry on doing business as before and will not materially be affected by the CPA, but the dubious or dodgy ones will be in for a tough time! The office of the Ombud is fully aware that there will be a certain type of “integrity challenged buyer” looking to take advantage of the Act and the industry has been assured that those types consumers have already been earmarked.
There will be a big increase in paper consumption. Most dealers Offer to Purchase document was a one page affair. It now runs into some 20 pages of terms and conditions, so a lot more forests will fall by the wayside as a by-product of the Act and a lot of lawyers will have lucrative additional work. Mostly when consumers are “the best protected in the world” it comes at a cost as when businesses are forced to close their doors, there will be job losses and tax losses for the state. At the end of the day, the cost of this legislation will be borne (once again) by the consumer.
Given that every single sale of any kind of product, or service, falls under the Act (with the exception of the State itself), the mind boggles at the sheer volume of complaints that will no doubt end op on the CPA’s doorstep. Of greater concern is how adept will the office of the CPA be? The Act itself and its specific conditions were only published two days after the Act came into force. This meant businesses were unable to modify their paperwork and policies in time. I would imagine that many complaints will be rejected in the first six months as the timing was clearly unconstitutional and infringed on the rights of business owners.
Time will tell and no doubt over time only the very worst cases will come before the Ombudsman. In the first week some 4000 complaints were received, of which the majority were against the City of Johannesburg (rates/taxes incorrect accounts) and the cell phone companies.
Addendum July, 2012 – The Commissioner was recently interviewed on radio and gave the following statistics in terms of the CPA. Some 240,000 complaints were received by the CPA in the first six months. After 12 months the COA had successfully ruled on 6,800 cases. So, looking at some basic arithmetic, if we take the 240,000 cases and double it for one year, we have 480,000 cases of which 6,800 have been heard. That leaves a massive shortfall in unresolved cases. I am not aware of which plans have been put in place to close that gap, but I am willing to stick my neck out and say that it is going to take a very long time